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Author: Jean-Claude Muller, 穆卓Executive Editor at BtoBioInnovation  jcm9144@gmail.com

SPECIAL REPORT #11

Drug Pricing in America:  Outcomes of the Senate Finance Committee

For many years the issue of US pricing has been an topic of vigorous debate. In January 2016, at his first press conference after being elected, President Trump was saying the pharmaceutical industry and its power lobbysts are “getting away with murder”. In October 2018, he indicated he wanted to participate in a crackdown and put forward a drug-price proposal whereby the US government would have a hands-on role in determining drug prices.  On Tuesday of this week, the Executives of seven Big Pharma companies: AbbVie, AstraZeneca, Bristol-Myers Squib, Johnson & Johnson, Merck & Co, Pfizer and Sanofi had to sit down in front of the US Senate Finance Committee to defend their price-setting policies. The Committee was chaired by Republican Senator Charles (Chuck) Grassley and was assisted by Democratic Senator Ron Wyden, the committee’s ranking member and a perennial pharma industry critic, as well as seven other Democrat and four Republican Senators, all firing sparks, raising tough questions and delivering blames.

In their opening statements, Pharmaceutical executives, who had been thoroughly briefed by their Public Relation, legal departments and lobbying experts, defended innovation coming from the US but acknowledged that problems of escalating prices, excessive prices on off-patented drugs with little competition and slow rate of biosimilar introductions existed.

The hearing started with a series of yes or no questions to each of the executives about their pricing decisions. In the following industry-focused discussion, the most prevalent topic was related to the Trump’s administration rebate proposal, where most executives agreed upon.  The current pricing is based on a system whereby drug companies set a list price and pharmacy benefit managers and insurers negotiate rebates. “There is a problem” AstraZeneca CEO Pascal Soriot said. “The current system is built on high prices coupled with rebates which is not sustainable”. He indicated that he would be prepared to cut its list prices accordingly if the government eliminates rebates. AbbVie CEO Richard Gonzales as well as Pfizer CEO Albert Bouria both said they would favor passing all rebates on patients. Merck CEO Ken Frazier explained why pharma companies don’t benefit from launching drugs with low list prices. “If you bring a drug to the market with a low list price, you get punished financially and you get no uptake. Today, the goal is paying into the supply chain the biggest rebate and that actually puts the patient at the disadvantage. The list price is actually working against the patient” Frazier said.  Sanofi CEO Olivier Brandicourt had been prepared to answer questions about rising insulin prices.  Last Friday, the US Senate Finance Committee had forwarded a five pages’ worth of questions letter to him, to Eli Lilly and to Novo Nordisk demanding information on the subject. Brandicourt was the only one of the three to testify at a time were lawsuits, government investigations and public outcry are occurring.

On pricing strategy, the executives came forward with several ideas in addition to the rebate proposal such as value-based pricing, a more transparent system and faster adoption of biosimilars on the US market.  On that specific issue Abbvie CEO Richard Gonzales was challenged to explain why Humira needed a plethora of more than 100 patents to be protected and why US citizens cannot get Humira at a reasonable price when patients in Europe have access to biosimilars.  Ongoing deals between AbbVie and biosimilar companies have already been coinded but will not allow Humira biosimilar copies to be launched in US prior to 2023. Senator Debbie Stabenow reminded the executives that US taxpayers fund research saying that NIH funding contributed to every single one of the 210 new drugs approved by the FDA from 2010 to 2016.

The Committee made clear that blaming regulators, middlemen, insurers and pharmacy benefit managers was not an excuse and that it was time to take action. Pascal Soriot disputed that claim “I don’t think we are blaming anybody in the system… we are in a system that used to be fit for purpose and drove enormous savings, but is no longer fit for purpose” he said. Experts believe this hearing is just the beginning of more investigation of the pharmaceutical industry with an increasing role of the government in drug pricing, healthcare affordability and patent-extension related to pricing powers. Other analysts pointed out that the two senators heading the Committee, Senators Grassley and Wyden, “are not adversarial, ….have a good working relationship on this topic” and would be able to come up with a bipartisan solution on drug pricing. Whatever the outcome of his hearing, the drug pricing issue will be on the agenda of the 2020 presidential election.

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